Morningstar | No Surprises in Briscoe's First-Half Results; FVE Unchanged. See Updated Analyst Note from 20 Sep 2018
There were no surprises in no-moat-rated Briscoe Group's first half results, thanks to good quarterly disclosure. Group sales of NZD 293 million, already released in early August, rose 4.3% on the prior corresponding period, or PCP. Net profit after tax, or NPAT, of NZD 29 million was 2.7% higher than the PCP, slightly trailing our full-year fiscal 2019 forecast of 3.6% growth. Despite tough trading conditions, Briscoe managed growth across both the homeware and sporting goods segments, and we are encouraged by the firm's focus on its online presence. We retain our NZD 3.65 fair value estimate, and last trading at NZD 3.52, shares in Briscoe screen as fairly valued.The homeware segment, which contributes the majority of earnings, reported sales in the first half of NZD 187 million, up 4.6% on the PCP. This is tracking ahead of our full-year forecast of 4.3% growth. EBIT grew 5.8% over the half, trailing our full-year forecast of 7.7% growth. We still expect earnings to grow in the midsingle digits annually over the next five years. The sporting goods segment increased sales by 3.8% on the PCP to NZD 107 million, trailing our full-year forecast of 6% growth. However, EBIT rose just 2.8%, reflecting the tough competitive environment weighing on operating margins. We expect earnings to be largely flat over fiscal 2019, as competition is likely to lead to heavy discounting over the key Christmas trading period.
Online sales now constitute close to 9% of total sales following 20% growth over the half. We believe Briscoe's online sales penetration is performing slightly ahead of the overall New Zealand retail market. We estimate that online sales account for less than 8% of sales for New Zealand's largest retailer, The Warehouse Group. Briscoe continues to focus on bolstering its omnichannel presence through improving delivery capacity and extending its trial of click-and-collect. We see a strong digital presence as key in an increasingly digital world.
Briscoe Group is a non-trading holding company. Co. is engaged in the provision of management services to its subsidiaries. Through its principal trading subsidiaries, Co. is engaged in selling homeware products and retailing sporting goods. Co. operates two operating segments: Homeware and Sporting Goods. As of Jan 31 2010, Co. had 58 Homeware stores and 32 Sporting Goods stores located throughout New Zealand.
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